Leasing and Unit Titles – things to be aware of

Property

Leasing a unit title, whether the lease is of a commercial or a residential nature, can be more complex than a typical lease of a standalone property.

After all, the landlord and the tenant won’t just be subject to the terms and conditions of the lease documents. Both parties will also need to take into account the provisions of the Unit Titles Act 2010 (Act) as well as the specific body corporate operational rules that relate to the development.

Unit Titles Act and the body corporate’s rules

A standard lease will require the landlord to comply with its obligations as a member of the body corporate. A landlord will also be obligated to use its “best endeavors” to ensure that the body corporate complies with its own rules and the provisions of the Act.

This may impose an obligation on a landlord to incur some expense to achieve the desired outcome. A landlord could, for example, be required to issue court proceedings to force the body corporate to maintain the common property if this was impacting the tenant.

Correspondingly a lease will usually set out that the tenant is required to comply with both the body corporate’s rules and any provisions of the Act that relate to the tenant’s use of the unit.

In this way the tenant is accountable to the landlord, and the landlord remains accountable to both the body corporate and their neighbouring unit owners. If a tenant has an issue with the body corporate or a neighbouring occupier then they must first discuss this with their landlord.

 

Permitted use

A body corporate is able to pass a rule restricting the allowable use of units to certain activities e.g. a unit may not be able to be used for commercial purposes.

Similarly a 2013 case (Croslands Investments Ltd v Body Corporate 183787) decided that a body corporate was able to pass a rule that the body corporate’s consent would be required for any change in the use of a unit. In that instance the development was a shopping centre which already contained 2 beautician tenancies. A 3rd tenant wished to amend their business use so that they could offer a nail spa service. The body corporate was able to deny that change of use on the basis that a 3rd beautician-styled operator would be detrimental to the overall tenancy mix of the development.

 

Maintenance of a leased unit title premises

A typical lease will require a tenant to maintain the leased premises to the same cleanliness and condition as they were in when the lease commenced, albeit subject to fair wear and tear.

The Unit Titles Act in turn requires the landlord (as the unit’s owner) to maintain their unit in good order, or to carry out any work that is ordered by a territorial authority or public body. The Act’s emphasis is on reducing the potential for a poorly maintained unit to damage neighbouring units.

The Act also states that the body corporate is permitted to enter the unit to view its condition and to ascertain whether the Act and the rules are being complied with. The body corporate is also required to carry out work to a unit’s building elements and infrastructure that serves more than one unit.

This can be a very confusing subject so you are welcome to contact our expert Property Team or David Fitchett directly for more information, david.fitchett@cavell.co.nz or +64 3 339 5611.

 

 

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